HONEY, I SHRUNK THE MIDDLE CLASS

Henry Ford not only invented the Model T and the factory assembly line, he also created the great American Middle Class.

In the early part of the 20th century, the auto was the plaything of the richies. No one else could afford one. Ford's idea was to pay his American workers enough to be able to afford his invention, resulting in his earth-shattering pay scale of $5 a day in a dollar-a-day economy. By integrating the concepts of assembly line production, low prices and high wages, Ford created the perfect economic storm: the Great American middle class. The economic group became the dominant force in America's unbelievably successful consumer-driven economy. By mid-century, the middle class connotation conveyed so much prestige that Nelson Rockefeller claimed to be a member (although his bankbook said otherwise).

Now the business world has spun 180 degrees on its axis. While Henry Ford grew wealthy creating the middle class, the modern corporate CEO seems bent on raking in millions by destroying it.

If you doubt that, just connect the dots.

• In 2002, CEO pay and other forms of compensation rose 10%, according to a survey conducted by Mercer Human Resource Consulting.
  
• Total return of the S&P 500 shriveled by 24% during 2002.
  
• CEO pay packages rose 90% from 2000 through 2002, according to the Corporate Library.
  
• In 1996, Michael Ovitz resigned as Disney President after a mere 14 months of mediocre performance. For failing in his job, Ovitz received $38 million cash and about another $100 million in stock options.
  
• Many CEOs suffering forced resignations broke the bank, receiving millions. Among them were WorldCom's Bernard Ebbers, Adelphia Communications' John Rigas, and Coca-Cola's Douglas Ivester.
  
• The average pay for large corporate CEOs was $12 million, according to Bloomberg Business News.
  
• CEOs now receive over 400 times as much pay as do the corporations' lowest-paid workers. (In 1972, it was about 30 times more).
  
• CEO salaries rocketed up more than 500% in the 1990s.
  
• The average worker's pay went up only 32% in the 1990s.
  
• If the annual pay for production workers had gone up as fast as that of CEOs, their average compensation would have been about $120,000 a year, instead of $24,700.
  
• If the minimum wage has increased as fast as CEO pay during the 1990s, the minimum wage would have risen from $3.80 to $17.90 an hour.
  
• Congress has voted itself five pay hikes since 1997.
  
• The minimum wage for poor workers has been stuck at $5.15 an hour since 1997.
  
• During the past 30 years, inflation has gone up faster than the minimum wage.
  
• The purchasing power of the minimum wage has been going down for a long time, which means the poor are able to buy less in 2003 than in 1968.
  
• A two-income, minimum-wage household can barely escape poverty. (A 40-hour week produces only $10,000 a year, while the federal poverty level has risen to $16,000).
  
• CEOs who fired the most employees tended to receive the biggest pay increases in 2002, according to a study by the Institute for Policy Studies.
  
• Over 2.7 million manufacturing jobs have been lost since July 2000 due to layoffs and the exporting American of jobs to foreign countries.
  
• CEOs who underfunded their companies' pension plans tended to receive the lushest pay packages, according to the Institute for Policy Studies.
  
• The Pension Benefit Guaranty Corp., which insures retirement benefits for 44 million workers, warned that private employer pension plans are $400 billion short of assets required to meet obligations – which could lead to lower retirement benefits for middle-class retirees.
  
• In 2002, the U.S. imported almost $1 trillion in goods manufactured abroad, which cost the country millions of good, middle-class jobs.
  
• In 2000, CEOs exported 102,674 jobs, according to the Department of Labor and Forester Research.
  
• In 2005, CEOs are projected to export 587,592 jobs.
  
• CEOs will export over 3 million jobs and $136 billion in wages abroad over the next 15 years, according to Forrester Research.
  
• Financial services CEOs will transfer more than 500,000 American jobs to foreign countries.
  
• Good-paying middle-class jobs in law, sales, architecture, business, computer, and software will lead the exodus of jobs overseas.
  
• American wages will decline in the face of low-wage foreign workers. CEOs will pass over American investment analysts who’d cost them $150,000 a year when English-speaking investment analysts in India, South America and Eastern Europe are available for less than $20,000 a year.
  
• Benefits, especially healthcare, will decline for the American wage earner who competes with foreign workers, who demand little in the way of benefits.
  
• According to many news reports, two-income middle-class families are finding it more and more difficult to make ends meet.
  
• As the size and health of the American middle class deteriorates, purchasing power declines, causing a flight to buying cheap, imported goods.
  
• Although consumers have continued buying, slowly rising wages have forced them to pile up record amounts of debt.
• Consumer bankruptcy filings continue to rise.

If you connect the dots, it is easy to see that a combination of CEO greed and government support of globalization have created a perfect storm, which is resulting in the destruction of the American middle class.

Unable to achieve performance-based compensation packages through increases in sales growth and upward growth-based stock movement, CEOs are resorting to increasing profits through cost reduction. Exporting American jobs is an effective way to reduce costs. With fewer middle-class jobs and declining middle-class jobs, the middle class loses purchasing power. Initially, lost purchasing power is financed through consumer debt. The next step finds reduced purchasing power showing up in ever-decreasing economic growth. Slowing economic growth will encourage CEOs to accelerate the exporting of good, middle-class jobs.

The end result is the collapse of the U.S. economy and the end of the U.S. as the world's only superpower. By 2020, India and China may rival the U.S. in economic and military power.

We must look out for the two destructive G's: Globalization and CEO Greed.